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E.C. Danby Versus Commissioner of Income-Tax, Bihar and Orissa

1944 (2) TMI 17 - PATNA HIGH COURT

Miscellaneous Judicial Cases Nos. 68, 69 of 1943 - Dated:- 3-2-1944 - Fazl Ali (CJ) And Manohar Lall, JJ. For the Assessees : S. K. Mazumdar, K. P. Varma and B. N. Jain For the Commissioner : S. M. Gupta JUDGMENT Fazl Ali, CJ. The question which has been referred to us is:- "Whether in the circumstances of the case the sum of ₹ 5,805 paid as salary to the applicant for the purpose of supervision of the agricultural concern is exempt from taxation under Section 4(3)(viii) of the Income .....

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l. A.L. Danby jointly own a partnership concern and the arrangement between them is that whoever will supervise the management of the concern will get remuneration. The assessee is said to have received in the course of the accounting year a sum of ₹ 5,805 as remuneration for managing the agricultural property owned by the concern and the question to be decided is whether this amount can be taxed as salary. The case of the assessee seems to have been that the remuneration is really in the .....

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hin the meaning of Section 4(3)(viii)? The Tribunal, however, has formulated the question as stated above. Now what seems to have been found as a fact is that the disputed payment is remuneration for extra work done by one of the partners and the assessee himself in his application under Section 66(1) of the Income-tax Act does not seriously dispute that the payment in question is in the nature of salary or remuneration. Paragraph 3 of the petition refers to the following findings of fact among .....

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being that the partners received such extra profit even during their absence from India, but only with this difference that during their absence from India they received half of their salary or extra profit allowed as supervision charge". In the same paragraph it is pointed out that "the proper test for appreciating the nature of such receipt will be to determine the entire income of the concern both agricultural and non-agricultural in accordance with the Income-tax Act; the entire sa .....

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on received by a partner out of the proceeds of agricultural property for his management of that property and which is in the nature of a salary is exempt from income-tax on the ground that it is really agricultural income. The Tribunal has decided that such income is taxable under the Income-tax Act and in so doing relied upon Major Conville v. Commissioner of Income-tax [1935] A.I.R. 1935 Lah. 978; 3 I.T.R. 404. In that case the facts were as follows:- One Major Conville and his sister had a s .....

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son was entitled to treat that part of the income as agricultural which he received as of right by virtue of the ownership of his share and that the surplus was to be treated as salary and therefore taxable as he received it for managing the father's estate. It was further held that even a co-owner could employ another co-owner on the business of the joint ownership and similarly a partner could be employed by another partner on the business of the firm. This decision, with which I entirely .....

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y will not make it agricultural income because the payment was received not as part of his profit from the agricultural property, but as remuneration due to him for work done as manager of the property. This view is supported by the decision of the Judicial Committee of the Privy Council in Hon. Nawab B. Habibulla v. The Commissioner of Income-tax, Bengal [1943] 11 I.T.R. 295; 60 I.A. 14. In that case the appellant before the Privy Council received by the terms of a scheme of administration a fi .....

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f his remuneration does not depend either on the nature of the properties or assets which constitute the wakf estate, or on the amount of the income derived therefrom by the wakf estate. If, as might possibly happen the whole or a portion of the wakf property ceased to be represented by agricultural lands, it is clear that the remuneration fixed by article 15 of the scheme would not be affected." Our attention has been drawn to the fact that the Privy Council have also observed that a diffe .....

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